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Doing Without Money: A critical assessment of Woodford's analysis

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  • Colin Rogers

    (School of Economics, University of Adelaide)

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    Abstract

    Woodford employs an inter-temporal general equilibrium model to examine the properties of the monetary system as it evolves form the use of a physical medium of exchange to an electronic medium. He presents a structure in which cash as a means of payment can be made to vanish at the limit but where he claims the price level remains determinate. It is shown that Woodford's analysis involves fundamental but still widespread conceptual and methodological errors. His general equilibrium model does not map into the world of electronic money and his analysis has no implications for the art of central banking.

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    File URL: http://128.118.178.162/eps/mhet/papers/0411/0411001.pdf
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    Bibliographic Info

    Paper provided by EconWPA in its series Method and Hist of Econ Thought with number 0411001.

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    Length: 33 pages
    Date of creation: 03 Nov 2004
    Date of revision:
    Handle: RePEc:wpa:wuwpmh:0411001

    Note: Type of Document - pdf; pages: 33
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    Web page: http://128.118.178.162

    Related research

    Keywords: Electronic money; Cashless limit; Hahn property; Accounting systems of exchange;

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    1. Michael Woodford, 1998. "Doing Without Money: Controlling Inflation in a Post-Monetary World," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 173-219, January.
    2. David E. Laidler, 1988. "Taking Money Seriously," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 687-713, November.
    3. Robert E. Lucas, Jr. & Nancy L. Stokey, 1985. "Money and Interest in a Cash-in-Advance Economy," NBER Working Papers 1618, National Bureau of Economic Research, Inc.
    4. Bennett T. McCallum, 1985. "Bank Deregulation, Accounting Systems of Exchange, and the Unit of Account: A Critical Review," NBER Working Papers 1572, National Bureau of Economic Research, Inc.
    5. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
    6. Bennett T. McCallum, 2004. "Monetary Policy In Economies With Little Or No Money," Pacific Economic Review, Wiley Blackwell, vol. 9(2), pages 81-92, 06.
    7. Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 203-20, April.
    8. Colin Rogers & Thomas K. Rymes, 1998. "Indirect Convertibility and Quasi-Futures Contracts: Two Non-Operational Schemes for Automatic Stabilisation of the Price Level?," School of Economics Working Papers 1998-17, University of Adelaide, School of Economics.
    9. Hahn, Frank H, 1973. "On Transaction Costs, Inessential Sequence Economies and Money," Review of Economic Studies, Wiley Blackwell, vol. 40(4), pages 449-61, October.
    10. Alain Ize & Arto Kovanen & Timo Henckel, 1999. "Central Banking without Central Bank Money," IMF Working Papers 99/92, International Monetary Fund.
    11. Fama, Eugene F., 1980. "Banking in the theory of finance," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 39-57, January.
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